The situation
This is an anonymised composite reflecting a recurring pattern, not a specific settled transaction. A business owner scaling back operations after years of running a larger enterprise decides to move into smaller, more efficient premises, but needs to settle the new, smaller purchase before their larger existing premises has sold, since a suitable smaller property has become available sooner than expected.
Why it's hard
The owner's capital is largely tied up in the larger premises, which will comfortably fund the smaller purchase once sold, but that sale has not yet occurred and there is no guarantee it will settle on a specific timeline. Downsizing scenarios can also involve winding back trading operations at the same time, which some lenders read cautiously if not clearly explained as a deliberate, planned transition rather than a sign of business distress.
How it can be structured
A bridging loan secured across both properties, sized to settle the smaller purchase ahead of the larger premises selling, is the standard structure, with the facility repaid from the sale proceeds of the larger property once that settles; the exit is that sale. Presenting the downsizing as a clear, deliberate strategic decision — supported by a business plan for the smaller operation and evidence the larger premises is being actively marketed — helps a lender distinguish this from a distress scenario, which is assessed very differently. Where the larger property is not yet listed, agreeing a realistic marketing timeline with an agent before applying for the bridge strengthens the file considerably.
Lenders will typically ask directly why the business is downsizing, and a clear, well-documented answer, whether a planned reduction in scale ahead of retirement, a shift to a leaner operating model, or consolidation following a change in the business's activities, helps distinguish a deliberate strategy from a sign of underlying financial stress, which would be assessed on very different terms entirely. Presenting updated financial projections for the smaller operation, ideally reviewed by an accountant, gives the lender a concrete basis for confirming ongoing serviceability once the transition is complete, rather than relying solely on the value of the properties involved. Where the larger premises has particular features that could limit its buyer pool, such as a specialised fit-out, an unusual configuration, or a location that suits only a narrow range of occupiers, flagging this honestly and pricing the marketing campaign accordingly tends to produce a more realistic settlement timeline than an optimistic asking price and a rushed campaign. Some borrowers also explore a leaseback arrangement with the eventual buyer of the larger premises, remaining as a tenant for a short period post-sale, which can further de-risk the timing of the whole transition.
What it typically costs
Bridging facilities here are priced for their short term and the certainty of the exit, quoted on enquiry once a lender has reviewed both properties and the marketing plan for the larger premises. An establishment fee and, in many structures, capitalised interest are standard.
Timeline
- Same day — scoping call confirming both properties, the new purchase and the marketing plan for the existing premises.
- 2–5 business days — valuations on both properties and lender matching.
- 5–10 business days — credit approval and offer.
- 3–5 business days — settlement of the new purchase, bridging facility in place.
Questions we'd ask you
- Is the larger premises already listed for sale, and what is the expected timeline?
- What is the combined equity position across both properties once the new purchase settles?
- What is the business plan for the smaller, downsized operation going forward?
- Can the business service interest on the bridge if the sale takes longer than expected?
- Is there flexibility on the new premises' settlement date if the sale is delayed?
Related
Bridging loans · Commercial property loans · Business owners · Bridging